Social justice and a change of economic policies in favor of the marginalized were at the core of the uprisings that started in the Arab region in late 2010, yet even in the midst of these uprisings governments did not fundamentally deviate in their policies from the neoliberal path. Arab revolutions called for fighting corruption, fair wages, establishing a social security network, increasing expenditure on public services especially education and health, and restructuring the tax system. However, changes made in these respects remained limited and mostly superficial as state priorities remained centered around handling budget deficits and cash management coupled with an increased tendency towards foreign loans in the absence of transparency and popular or parliamentary monitoring. As popular pressure gradually receded, the neoliberal project came back to dominate economic policies and started venturing into fields that were not accessible to it before 2011. The prioritization of foreign and local investment also came back to the forefront once more.

This paper deals with the development of the neoliberal project before and after Arab revolutions and how marginal changes in economic policies reflected the continued dominance of this project. The paper will attempt to place Arab neoliberalism within the framework of the global neoliberal project in a way that demonstrates how the latter is resuming its policies regardless of any seemingly obstructing transformations in individual countries, as was the case with Greece to cite one example. The paper will examine the “there is no alternative” rhetoric which obstructs attempts at introducing a project that is radically different from the neoliberal one or even attempts at introducing changes within the already-existing economic policies. The paper then tackles the reasons why not even minimal reforms were introduced to respond to demands of the protestors and of political/social/economic alliances in an attempt to examine the inflexibility of the neoliberal project itself and how this has contributed to its continued dominance. The paper will finally work on delineating the basic outline for changes in economic policies towards social justice.

The neoliberal Arab project: Internal and external debate

In September 2007, the International Finance Cooperation (IFC), part of the World Bank Group, announced that Egypt is the top reformer in economic policies: “Egypt greatly improved its position in the global rankings on the ease of doing business, with reforms in five of the 10 areas studied by the report”[1]. Those areas include “strengthened property rights, enhanced investor protections, increased access to credit, eased tax burdens, and expedited trade while reducing costs,” all part of the Washington Consensus, known to be the main pillar of the neoliberal project.

The same report mentioned other countries such as Saudi Arabia, which that year ranked 23rd in terms of making it easier to do business and was on the list of the top 10 reformers according to the report’s criteria. The report also mentioned Tunisia as one of 11 countries that implemented three or more procedures that the IFC describes as reforms. In November 2008, Tunisian dictator Zein al-Abdedin ben Ali awarded director of the International Monetary Fund Dominique Strauss-Kahn the Order of the Tunisian Republic “in appreciation of his intellectual capabilities and his contribution to supporting economic development on the global level[2].” Strauss-Kahn responded by lauding the economic policies in Tunisia and which he described as “a role model that should be followed by several emerging countries”[3].

It is easy to trace the Washington Consensus recommendations in most Arab countries if not all of them, variations mainly depending on balances of power, capitalist developments, and position in the global market. The ten recommendations, drafted by John Williamson[4], are as follows:

Low government borrowing. Avoidance of large fiscal deficits relative to GDP;

Interest rates that are market determined and positive (but moderate) in real terms;

Competitive exchange rates;

Trade liberalization: liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs;

Liberalization of inward foreign direct investment;

Privatization of state enterprises;

Deregulation: abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions;

Legal security for property rights.

Adaptations of the neoliberal project in the Arab region varied from one country to another, yet in all cases the pressure exercised by global capital played a major role in making this project dominant in the region. The neoliberal project was marketed via several global financial institutions, on top of which was the world’s most influential trio—the World Bank, the International Monetary Fund, and the World Trade Organization—which not only pushed for adopting the neoliberal project, but also kept commending its success as was the case with Egypt and Tunisia. While global pressure was the main impetus behind adopting neoliberal policies, local dynamics in each Arab country played a major role in consolidating the influence of those policies, especially in the light of alliances forged by ruling cliques in the past few decades.

The trio was party to the drafting of economic policies in Egypt, Tunisia, and Jordan among other countries starting from the 1970s through the post-Second Gulf War era until the remarkably fast transformation towards neoliberalism in the past decade and a half.

Neoliberalism in the Arab region turned into a ruling project that was associated with signing bilateral trade agreements, joining the World Trade Organization, and responding to pressures and promises from the World bank and the International Monetary Fund. This project was part and parcel of the US aid to Egypt for decades whether on the economic or military level. The neoliberal project consolidated the economic and political hegemony of international corporates and the political and military powers that support them. Adam Hanieh[5] underlines the six main policies through which the foreign hegemony project was restructured. These included the European Partnership policies and the merging of production sectors here and there in order to redirect North African economies towards European capital in a way that makes the Mediterranean subordinate to Europe through trade and direct foreign investment[6]. Meanwhile, the United States invested in its alliances in the Gulf region and Israel then empowered the neoliberal project through the Qualifying Industrial Zones (QIZ) agreement with Egypt, Jordan, and Israel.

However, the neoliberal project was also concerned with governance even on the global level. True, the neoliberal project was a reaction to the financial crisis faced by the long Keynesian global economic prosperity that took off in the early 1990s, yet it was at the same time representative of a project that aimed at restoring the hegemony of capital-owning classes. Several theories attempt to explain the reasons for the rise of neoliberalism such as the Social Structure of Accumulation (SSA), which focuses on the fluctuation between growth and depression in capitalist economies. According to Richard Seymour, “political and economic elites contrive a set of institutions favorable for capital accumulation, setting off a period of sustained growth until such time as they exhaust themselves, and an intractable crisis results in a paradigm shift. This is said to account for long cycles of capital accumulation and by shifts between ‘liberal’ and ‘regulatory’ paradigms”[7]. Other theories argue that the rise of neoliberalism is the manifestation of the growing hegemony of capital on the ideological, pragmatic, and political levels. In all cases, attempted explanations always underline the central political nature of the neoliberal project especially as far as governance and the balance of power are concerned. For Adam Hanieh, neoliberalism involves much more than a list of economic procedures that the free market demands, but also constitutes a radical restructuring of class relations. As for support for the neoliberal project inside the Arab region, Hanieh argues that global neoliberalism triggered the emergence of domestic powers that found it in their best interest to support the new status quo[8].

In addition to foreign influence, domestic factors also played a major role in the rise of neoliberalism in the Arab region. While those factors varied in accordance with the economy of each country in the region, one common denominator was the redesigning of the social structure and modifying governance projects in order to handle the complex economic and political crisis. Added to this is the growing influence of funding entities and increasing regional intervention in the affairs of a number of countries in the region.

Support for the neoliberal project took several paths and was triggered by a variety of motives in the Arab region. For example, in Gulf countries, the oil revenue crisis and signs of popular indignation at the political and ideological governance foundations in this area led the state to look for solutions outside the oil sector. Those solutions included external expansion towards the global market and alliances with advanced capitalist centers in the US, Europe, Japan, and East Asia through acquisitions[9].

In Egypt, the rentier state faced a grave crisis throughout the last years of the Mubarak era. The 1990 Gulf War had already rescued Mubarak’s regime through the reduction of external debts in return for taking part in the war in addition to signing the IMF agreement that initiated an expansive privatization plan and a set of austerity measures throughout the 1990s. However, the crisis persisted and was, in fact, aggravated. One of the solutions proposed at the time was allowing another party to participate in governance: businessmen[10].

The plan for bequeathing power to Gamal Mubarak, which was one of the main triggers of Egypt’s January 2011 revolution, was presented as the main channel through which the neoliberal project, started in 2004 with the appointment of Ahmed Nazif as prime minister, can kick off. In fact, the earlier phases of shifting to neoliberalism gave rise to new partners in governance, mainly new businessmen who started looking for adequate political representatives and not the other way round. The state was inclined to accept the alternatives proposed by those new partners to overcome the crisis, thus it decided to support them and back their plans with a set of policies that enabled them to use a sizable portion of the country’s resources. These new businessmen chose Gamal Mubarak as their political representative. Accumulation by dispossession and the privatization of public services in favor of those businessmen expedited the process of shifting to neoliberalism in what came to be described as one of the most typical examples of conforming to the Washington Consensus with the blessings of the global financial trio.

Egypt was not the only country where the world of bureaucracy and security, which dominated the post-independence state, allied with that of emerging businessmen. The Tunisian experience is quite similar to that of Egypt, both being commonly labeled “crony capitalism” and both later considered by the World Bank following the toppling of Ben Ali and Mubarak a form of “state capture.” Therefore, the Egyptian and Tunisian growth rates previously praised by the financial trio have quickly proven a failure as the procedures thought to have rescued their economies were shown to have widened social gaps and increased the suffering of marginalized classes.

Neoliberalism and Arab revolutions:

The financial crisis that hit the United States in 2007-2008 then extended to the entire world is a milestone in the neoliberal project. Despite its expansion across the world, the neoliberal project was not a success. Neoliberalism did lead capitalist accumulation to the point of growth and prosperity typical of the global capital cycle. In fact, global capitalism had never witnessed this kind of upsurge, manifested in three decades of continuous growth, since the late 1960s. This was shown in the German and Japanese cases in the 1980s followed by South East Asia, also known as Asian Tigers, in the 1990s. Then the decline started until it reached Russia in 1998 and was followed by the Dot-com bubble in the US then the economic crisis in Argentina in 2000 and 2001. The seemingly successful financial system was the very same source of the financial crisis. It is against this backdrop that revolutions erupted in Tunisia, Egypt, Libya, Yemen, and Syria while other countries witnessed uprisings that did not lead to toppling the regime such as Jordan, Morocco, Bahrain, and Kuwait.

When the global financial crisis took place, the first reaction from heads of state in the Arab region was to stress that it will not affect the region. Some Egyptian ministers even went as far as claiming that the Egyptian economy might benefit from the crisis like what happened to the Egyptian stock market during the Asian crisis in 1997-1998. In the beginning, foreign currency reserves and lack of a direct link with declining economies protected some Arab countries from an economic collapse, yet after a while the impact of the global financial crisis started showing in the Arab region. This was demonstrated in the decline of direct foreign investment, remittances, and tourism as was the case with Egypt and Tunisia. Gulf States were affected in a more profound manner owing to their close ties with the global market and to accumulation in Europe and the United States.

Like what happened in the global context, ruling classes intervened through pumping a set of incentives to rescue their partners in governance and accumulation. This was paralleled by an incredible hike in the prices of foodstuffs on the global level with the subsequent inflation causing growing indignation. While the IMF was still praising growth rates in Egypt and Tunisia as successful examples of the neoliberal project and market economy, social and labor resistance groups were gradually rallying to act against the manifestations of neoliberalism.

In Egypt, labor protests can be traced back to 2004, when Ahmed Nazif became prime minister, but a remarkable development was seen in 2006 and 2007 with the strikes staged by textile workers. At the same time, several countries in the region witnessed a series of protests whether spontaneous or organized by laborers and trade unions such as Jordan, Tunisia, and Morocco. The protests aimed at fighting policies that led to decreasing wages and subsidies and increasing prices. In Jordan, protests focused on increasing fuel prices. In Tunisia, 2008 witnessed a miniature version of the 2010 and 2011 uprisings with the protests that erupted in the mining area and the general strike called for by the Tunisian General Labor Union which played a major role in the battle against ben Ali. The working class in Egypt also played an important role in toppling Mubarak through the strikes staged by the transportation association, the Post Authority, and Suez Canal workers among others.

The crises faced by the rulers was, therefore, intertwined with the rising indignation of the subjects who had been increasingly suffering from poverty, marginalization, unfair distribution of wealth, corruption, price hikes, and unemployment until the uprising reached its peak in 2011.

The project continues: The indications

A revolution is political when the focus is on changes in government leadership and forms of governance while a revolution becomes social when it attempts to seize power from a certain class that only serves its own interests. American theorist Hal Draper offers another type of revolution: a political revolution with a social spirit in the sense that its political demands are the culmination of a social uprising against monopoly of power. Draper notes that the distinction between the political and the social is extremely difficult since they merge together in varying degrees. This could be the ideal definition of the Egyptian revolution and other revolutions in the region as a reaction to the failure of the neoliberal project adopted by the ruling authorities. Through demanding the establishment of social and political democracy and the redistribution of wealth, the revolutions constituted an uprising against neoliberalism.

That is why Arab revolutions inspired the whole world, for they were far from confined within the borders of the Arab region and sent shockwaves across the world to become the main impetus behind a series of subsequent protests against financial corruption, austerity measures, and social inequality[11]. Yet five years after the eruption of Arab revolutions, Arab countries did not seem to have changed their neoliberal policies. In fact, those policies seem to have become even harsher and the same applies to the neoliberal project on the global level.

After the toppling of Mubarak and ben Ali, social justice became the main popular demand that while taking different shapes in each country mainly revolved around creating job opportunities, offering better public services, eliminating corruption, and dealing with the problems of wages and prices. While a few political changes, demonstrated for example in constitutional amendments, seemed radical at the beginning, they were after all dictated from above and economic policies remained in congruence with the neoliberal project or rather an extension of it. The policies of the Washington Consensus, therefore, remained dominant on the ground.

The Arab region was not different from the rest of the world in the way it reacted to the crisis. After billions of dollars and euros were pumped to rescue corporates and banks (the same happened in Gulf state, on top of which was Saudi Arabia, where money was used to contain public indignation in the aftermath of the Arab Spring), the following phase witnessed the implementation of austerity measures and the withdrawal of the state. An expenditure projection report reveals that there were two phases of state spending patterns since the beginning of the global financial crisis. In the first phase (2008-2009), most governments offered financial incentives and increased public spending. However, 2010 witnessed budget cuts even though the public had at the time become more susceptible to suffering the effects of the crisis, thus needed state support, according to a recent study by the South Center and Columbia University about austerity policies in 187 countries since 2010[12].

Based on the study, austerity measures have been intensifying in the Arab region, especially regarding fuel subsidies and foodstuffs in the past five years. In Egypt, Algeria, Jordan, Lebanon, Morocco, Tunisia, and Yemen, there have been measures for cutting subsidies and selling fuel at market prices. There has also been a tendency to reduce wages in the Arab region since Algeria, Egypt, Jordan, Morocco, and Tunisia are working on “reforming” the government system through wage reduction and layoffs. This was demonstrated in Egypt through, for example, the new Civil Service Law which triggered a wave of protests by civil servants.

Tax reforms, on the other hand, hardly extended to high incomes. For example, the capital gains tax on bourse was frozen after protests from the financial sector lobby. Algeria is planning to reduce tax exemptions while Egypt is about to impose a value-added tax, which expands the range of indirect taxes that constitute a burden on the poor.

Table 1.1

Country

Subsidy cuts

Wage cuts

Targeting social security network

Pension “reforms”

Work reforms

Health

care

Consumption

tax increases

Privatization

Algeria

*

*

*

*

Egypt

*

*

*

*

Jordan

*

*

*

*

*

*

Lebanon

*

*

*

*

*

Morocco

*

*

*

*

*

Tunisia

*

*

*

*

*

Yemen

*

*

Total

7

6

3

4

5

1

5

0

Austerity measures in the Middle East and North Africa 2012-2015

Source: South Center and Columbia University

It is obvious that the study indicates absence of any privatization plans in the seven Arab states, yet this most likely means selling public sector companies to a major investor only. There are plans in Egypt to offer shares of state-owned holding companies in the stock market and there is an expansion of partnership between public and private sectors in most of the countries in public services on top of which are healthcare, education, electricity, water, and sewage.

In Egypt and Tunisia, where ruling parties were toppled and transition of power was not accompanied by civil war, ruling elites gradually reappeared after protests subsided and businessmen started regaining their privileges while no development was visible in terms of fighting corruption.

In Tunisia in 2015, a law was passed to authorize the capitalization of three public banks that went bankrupt as a result of lending businessmen during the ben Ali era and not getting the money back. At the same time, another law allowed reconciliation with businessmen charged with corruption and embezzlement of public funds.

In Egypt, a court ruling exempted the banking sector from the maximum wage law while the stock market lobby intervened more than once to suspend market taxes. Egypt and Tunisia were the first to apply legal modifications that would allow reconciliation with corrupt businessmen and would not allow citizens to contest government contracts which was the way several corrupt contracts were discovered following Mubarak’s ouster.

In the Gulf, the drop in oil prices drove states to start austerity measures that aim at reducing public expenditure. According to IMF statistics, budget surplus in the member states of the Gulf Cooperation Council (Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Bahrain, and Oman) dropped from 182 billion US dollars in 2013 to only 24 billion in 2014. Saudi Arabia, Bahrain, and Oman recorded a deficit in the 2014 budget for the first time since the start of the global financial crisis in 2009 and the oil barrel lost 50% of its price since mid-2014, which might deprive Gulf States of revenue estimated at 275 billion US dollars, according to the IMF.

This year, the United Arab Emirates liberated fuel prices and increased electricity prices in Abu Dhabi in a move expected to save hundreds of billions of dollars and Kuwait started selling several oil products at market prices, reduced expenditure by 17%, and is planning to increase the prices of fuel, water, and electricity. Meanwhile, Saudi Arabia is looking into putting “non-urgent” projects on hold and introducing changes to energy subsidies. Fuel prices in Saudi Arabia are, in fact, among the lowest worldwide. Qatar, Oman, and Bahrain are no exception since they are also studying the possibility of expenditure and subsidy cuts.

While Gulf countries can be justified since oil is their main source of revenue, the drop in oil prices could offer an opportunity for a country like Egypt. However, instead of channeling the difference in oil prices towards spending on healthcare and education in accordance with constitutional pledges, the Egyptian government still prioritized reducing budget deficits in compliance with a direct recommendation by the World Bank.

Why haven’t Arab neo-liberals offered concessions?

The question that poses itself is why the Egyptian revolution has not resulted in a substantial change in pre-revolution status quo. Even with the ability to contain popular indignation and the relative withdrawal of social powers that constituted a major component of the revolution, the structural crisis created by the neoliberal project is still persistent and might get worse. Wasn’t it logical for ruling elites to learn the lesson and offer some concessions for the sake of achieving stability? Why is the neoliberal project, which has proven problematic and inefficient, continuing in the same, if not a harsher, manner?

It is noteworthy that this phenomenon is by no means exclusive to the Arab region since the neoliberal project is still continuing across the world despite its inability to overcome the accumulation crisis. Several factors have contributed to the continuation of the neoliberal project:

Receding influence of popular movements: The counter-revolution took advantage of the developments that took place in some Arab Spring countries such as Syria and Libya to accuse revolutionaries of planning to undermine the state. Initiating campaigns to restrict freedom of speech, issuing laws that prohibit protests and strikes, weakening trade unions, and lack of diversity in the political scene triggered a remarkable decline in protests even when compared to the Mubarak era. This is the case in the rest of the Arab region with varying degrees and the result is the absence of bottom-top pressure for change and reform. Based on examples from history, change, including to neoliberalism, does not usually take place smoothly or gradually, but only through intensive lobbying and ferocious conflicts. For example, the shift to the welfare state was only achieved following a world war and enormous damage and the shift to neoliberalism was replete with conflicts, wars, military coups, and popular resistance. In the absence of groups that lobby for change, this change becomes much harder.

The inflexibility of the social structure of accumulation: The interests of the current ruling alliances are characterized by rigidity, which makes it hard for them to offer any concessions to popular resistance movements without sacrificing one the alliances’ major components. In the case of Egypt, the old partnership between the security apparatus and businessmen is still an obstacle since it is not possible to open corruption files without going through this partnership. Meanwhile, the partners, under pressure from the crises of governance and accumulation, work on securing their positions. This explains the series of modifications that took place before and after June 2013 to protect the process of accumulation by dispossession in public services and lands through removing executive regulations such as modifying the Tenders and Bids Law so that projects are directly assigned to business tycoons and companies affiliated to Mubarak’s interests’ network. Similar entanglements can be detected in the structure of the ruling elite that represents the social structure of accumulation and which renders any social concession, no matter how minor, a threat to the ruling alliance that might result in a survival conflict, Egypt being an exception owing to the status of its army.

Foreign intervention: The rigidity of domestic interests drove the ruling elite in Egypt to refuse some of the procedures that the IMF accepted as a means of containing popular indignation and dealing with the consequences of economic inequality. The IMF, for example, objected to freezing the capital gains tax on bourse since it saw it as fair and required to increase revenue. The IMF stance caused some form of undeclared tension between the two parties. In this case, local interests were even stronger than the cautious stand the IMF is known for. What happened is that the IMF, together with its two partners in the trio as well as new partners such as the European Bank for Reconstruction and Development, has managed to equip the Arab region with the ability to sustain the neoliberal project and then use it to overcome the crisis caused by the Arab Spring. The reaction of the IMF following the toppling of the ben Ali and Mubarak regimes was fast and quite unique in the sense that it did not focus on the political, cultural, generational, or technological aspects that were used in explaining the context within which the uprisings erupted. Instead, it focused on economic policies through the Deauville Partnership with Arab Countries in Transition, launched by the G8 in 2011, and whose papers were prepared by the IMF. The partnership reveals the main aspects of the economic policies that were being restructured following the 2011 shock. First, the partnership offers a framework for six countries: Egypt, Jordan, Libya, Morocco, Tunisia, and Yemen. This means that it included countries where regimes were not toppled such as Morocco and Jordan and excluded countries that witnessed popular uprisings such as Bahrain. It dealt with the six countries in a collective manner. Second, while funding and loans constitute a major component of any partnership between the Arab region and financial institutions (negotiations with the IMF included most of these countries and agreements have already been reached with Jordan, Morocco, and Tunisia), but the Deauville initiative is concerned with the general economic, political, and social tendencies. On the level of rhetoric, international financial institutions acted with extreme flexibility. Officials from the IMF and the World Bank were quick to underline the role of poverty, unemployment, inequality, and corruption in the eruption of the 2011 revolutions and several domestic and regional research centers followed suit. In the beginning, the reaction to rescue the hegemony and interests structure that serve these institutions was to rephrase the problem after acknowledging it then look for a technical solution. Concepts like containment growth and social justice, which seemed quite far-fetched for these institutions, were introduced. However, the general framework was maintained including austerity measures and prioritizing the reduction of budget deficits under the banner of “financial disciplining” and getting back direct foreign investment. Meanwhile, general policies were almost the same as before, maybe only milder until they took off at full speed after the withdrawal of revolutionary movements such as in Egypt in mid-2013. At that time, the very problems that were acknowledged before as the reason for the uprisings started to be overlooked. This can be seen in the way IMF reports went back to defending the ben Ali and Mubarak regimes in an attempt to absolve itself from the stigma of supporting regimes that intensified economic inequality. It is impossible to separate the stance of these financial institutions from social structures of accumulation in Gulf States which were amongst the main parties in the Deauville initiative from the start. The United Arab Emirates was even negotiating with the IMF on Egypt’s behalf after July 2013. Gulf states rank first in loans and investments in Egypt and are, in this regard, closely linked to the drafting of particular investment laws that protect their interests as well as supportive of the counterrevolution on the political, economic, and ideological

The pragmatic problems of the alternative: This does not only mean the alternative that can be offered outside the social structure of accumulation, but also the one offered from the point of view of the structure itself. In the context of the current crisis, global capitalism and its domestic manifestations were not able to offer an alternative that would solve the problem of neoliberalism and provide new horizons for accumulation and profits. This is what makes ruling classes keep rotating in the same vicious circle. Ruling classes promote Margaret Thatcher’s slogan “There is no alternative” to strip their opposition factions and advocates of change of their legitimacy. It is noteworthy that despite constant attempts at obstructing their efforts, popular movements managed to present a number of alternatives to the economic system and which are inspired by international experiences in self-administration, cooperative economics, education and healthcare development, priorities of public expenditure, and ways of dealing with government debts. The factions offering such alternatives are still, however, faced with a set of pragmatic problems. The Syriza experience in Greece highlights the magnitude of domestic and global challenges that can result in besieging and eventually defeating initiatives that offer radical alternatives to neoliberalism since it lacked the balances of power that would allow it to develop and defend its agenda.

[9] For more on the crisis of rentier economies and state solutions see Christopher Davidson’s After the Sheikhs: The Coming Collapse of the Gulf Monarchies.

[10] For more information see Samer Suleiman’s Strong Regime, Weak State: The Management of the Financial Crisis and Political Change in the Mubarak Era [Arabic]. Cairo: The General Association for Cultural Palaces, 2013.